It is probably one of the world’s worst kept secrets that I am fascinated by things both technical and mechanical. I like understanding how things work, enjoy seeing the progression of technology over time and have marveled at how quickly some advances have come to us almost as science fiction coming to life, only to become the norm (yawn) a few short years later.
Some of my interests run to motor vehicles, with a particular fascination with vintage motorcycles. In fact, until recently, the most modern one I’d owned was built in 1982. An opportunity to purchase a new one recently came up and I jumped at the opportunity. What an eye opening event this has proven to be. While the new machine is recognizable as being related to the classic, with basic controls in the same place and two wheels on terra firma, that’s about where the similarities end. I had to take a class to learn how to start it; how to stop it; how and where to put the gas. It was as if I had to unlearn a whole series of skills so I could learn new ones as replacements. Failing to learn one of those lessons actually left me stranded on the side of the road on Day #1. This was all a bit embarrassing for someone with as much time “in the saddle” as I have. A frantic phone call led to a sheepish moment and a head slap before we got on the road again.
And once on the road? It is faster, stops better, gets better gas mileage, is quicker and handles better than anything I have ever driven. Oh, and it was cheaper and far easier to maintain than “vintage” equipment. The revelation was, in a word, stunning.
Which, of course, got me thinking about a host of issues related to insurance company technology. Having detoured to the banking world for five years as a CIO, I returned to insurance and found that while I was gone, remarkably little had changed.
In a way, that was comforting. It was possible to re-engage quickly, understand issues deeply and explore reasons for the re-emergence of problems that once seemed solved. Legacy solutions continued to dominate the space with systems running on “Big Iron” with evolutionary strategies implemented to extend system life a bit longer. Tied to this are complicated, if not arcane, cost-accounting environments that make it extraordinarily difficult to truly understand basic concepts like “profitability” and “business value”.
It is also concerning. For the industry to thrive and survive, we need to be moving to better and more efficient business models. We need to better understand customer behavior and be in a position where we can peer into the future and find solution to support a rapid paced and complex set of financial issues. If this were a car, we would need to find a way to look through the windshield more and the rear view mirror less. As much as I enjoyed them, the 1980’s are never coming back and looking forward will be critical to maintaining relevancy over the long term. Although new capabilities such as mobile solutions are certainly important to for carriers to be planning for, there are a striking number of instances where they are being implemented on top of technical frameworks that are older than many of the people that are working on them.
Ultimately, these systems run slower, cost more to operate and are more difficult to enhance than truly modern capabilities would be. Like my old motorcycles, these platforms can be both comforting and somehow satisfying at the same time; we know how they work, where their flaws are and how technologies can be used to tweak a little more life from them.
On the flip side, this means carriers missing out on being able to make leaps forward into a world where the platforms allow for far great flexibility, much shorter time-to-market timelines for new products and better leverage of emerging skills and capabilities in the labor market. These changes certainly carry with them some level of risk; change always does. But the cost of staying in an existing comfort zone may ultimately be more problematic as players less steeped in tradition make greater inroads into the marketplace.
Recent cross-functional conversations with carriers have highlighted some of the challenges that go with trying to shift into a new operating model. One carrier expressed significant concern over how their operating model would be impacted by a new system that didn’t require running a nightly batch cycle. The whole value of real-time transaction processing was lost on a business unit function that has been running nightly batches since the dawn of time; since the staff involved had never seen something different, the idea that it could be somehow “better” was completely lost on them. Very similar, in fact, to the day I discovered that I didn’t know how to start my new motorcycle after I shut it off to grab a cup of coffee at the local Starbucks. Once the panic subsided, I discovered that the 21st century model is much better than what my previous experiences had framed for me as the “world of the possible”.
Another carrier spent considerable time trying to understand how a new core system would integrate with the aging workflow environment that supported an even older policy administration and claims processing solution. Once the true picture of what is possible with a modern solution emerged, this group of very capable professionals looked like kids given a day pass at Great Adventure. The world of what’s possible had gone from “playground” to “theme park” in less than an hour. Without the ability to quickly see an alternative space it is too easy to become trapped in a world of incremental improvements.
The motorcycle that pretty much anyone can buy at their local dealership today is faster, cheaper, easier to work on and safer than the custom built, limited production, racing machines of a generation ago. No matter how much TLC is showered on the old solutions they will never be able to perform at the level of “store bought” solutions today. Even if configuration is required to create competitive advantage on a new platform, it can be far more effective than another layer of proverbial lipstick on a pig!
Old paradigms die hard but carriers living on nostalgia will find it ever harder to compete in the future.